When Malaysia’s opposition alliance notched a historic upset election win on May 9, attention quickly turned to the prospects for various multibillion-dollar infrastructure projects outgoing premier Najib Razak entered into with China.
As the opposition’s prime ministerial candidate, Mahathir Mohamad vowed greater scrutiny of China-linked projects, which on the hustings he frequently criticized for their overreliance on Chinese manpower and materials.
This month, Mahathir’s new government issued a stop-work order on major China-linked projects, stalling over US$20 billion worth of contracts in a bid to renegotiate in the name of fairness and viability.
Mahathir, who maintains he wants “good relations” with China, will travel to Beijing next month in a visit that will be closely watched as Malaysia shifts away from the Najib-era transactional model of foreign policy in favor of a more non-aligned stance reflective of the nation’s emerging stature as a regional middle power.
Daim Zainuddin, the premier’s trusted trouble-shooter and head of the country’s Council of Eminent Persons advisory body, was recently dispatched to Beijing to lay the groundwork for Mahathir’s follow-up visit in August and establish a scope for the renegotiation of suspended projects.
Moments before his meeting with Foreign Minister Wang Yi, Daim was informed by his counterparts that the Malaysian Anti-Corruption Commission (MACC) had undertaken synchronized anti-corruption raids on two Chinese state-owned entities associated with the suspended projects, according to sources cited in news reports.
Daim reportedly told Beijing the raids were unfortunate and reiterated that Malaysia remained serious about maintaining strong ties with China. Chinese authorities made no official statement regarding the MACC’s move, which targeted the China Petroleum Pipeline Bureau (CPPB) and China Communications Construction Company (CCCC).
Though Mahathir’s new administration has underscored the need to prosecute alleged abuses without favor and according to the law, it is unclear why the raids were carried out during Daim’s sensitive visit to China, though the move appears to be indicative of a hardball strategy aimed at extracting major concessions from China.
Speculation by close associates of Daim told the Straits Times newspaper that rogue elements in the civil service aligned to the outgoing Najib administration may have pressed the MACC to carry out the ill-timed raids in a bid to complicate ties with China and embarrass Daim, who is reportedly resented for the outsized influence he wields as head of the CEP.
While a wider reorientation of long-standing Sino-Malaysia ties is on the cards, the status of stalled China-led infrastructure projects is likely to top the agenda when Mahathir touches down in Beijing, a city he visited several times during his first premiership.
Suspended projects include the US$20 billion East Coast Rail Link (ECRL), which was envisioned to link the South China Sea in Malaysia’s rural east with the western seaport of Klang and the strategic shipping routes along the Strait of Malacca.
Financed by a US$14 billion loan from the state-owned Export-Import Bank of China, the ECRL has proven especially controversial in Malaysia. Many have questioned its economic utility, while others balked when the Chinese state-owned CCCC was appointed as project’s contractor without an open tender.
Two suspended gas pipeline projects, the Multi-Product Pipeline (MPP) in Malacca and the Trans-Sabah Gas Pipeline (TSGP) worth a combined US$2.3 billion were also financed by the Export-Import Bank of China. The Chinese state-owned CPPB was reportedly set to become the project’s main contractor under Najib’s government.
Mahathir has consistently cautioned against unsustainable investments in large-scale infrastructure projects over fears that Malaysia could be forced into sovereignty-eroding terms if unable to service its foreign debts.
There are also suspicions that Chinese companies were involved in the multi-billion dollar 1Malaysia Development Berhad (1MDB) graft scandal, of which Najib stands personally accused of foul play. He has consistently denied any wrongdoing in a scam now under investigation in several countries, including the United States, Switzerland and Singapore.
Investigators probing 1MDB believe that Chinese purchases of stakes in a strategic power utility and real estate assets from 1MDB-related entities in 2017 were used to help settle some of the fund’s enormous debt liabilities and rescue it from potential default. The sales extended a political lifeline to Najib, who founded and oversaw 1MDB, and arguably made his administration financially dependent on China.
Accusations of 1MDB-related corruption hampered US-Malaysia ties beginning in 2015, as critical reports portrayed Najib and his associates as unrestrained kleptocrats. Economic and security ties with Beijing, already robust, were meanwhile substantially deepened after the sales. Malaysia also became one of the top investment destinations for projects linked to China’s US$1 trillion Belt and Road Initiative (BRI).
Despite being a relatively minor recipient of Chinese investment up to 2012, Malaysia became the fourth-largest recipient of China’s overseas direct investment last year. Najib’s administration, a claimant to territorial disputes in the contested South China Sea, had also appeared to soft-pedal its claims to avoid confrontation with Beijing.
Since returning to power, Mahathir has called the presence of warships the biggest threat to peace in the South China Sea’s disputed waters and recently proposed that they be kept out of the region in favor of joint small-boat patrols, a middle position not likely to endear him with either the US or China.
Malaysia’s finance ministry is currently investigating links between personalities involved in Suria Strategic Energy Resources (SSER) – a finance ministry-owned subsidiary setup in 2016 to facilitate the MPP and TSGP projects – and SRC International, a former unit of 1MDB that pursued overseas investments in energy resources.
Najib was arrested and charged earlier this month with abuse of power and criminal breach of trust in connection with the alleged embezzlement of US$10.6 million from SRC International, a small fraction of the billions of dollars allegedly siphoned from 1MDB. He denies wrongdoing and has since been released on bail pending trial in February.
Mahathir’s administration is also seeking a fugitive Malaysian businessman known as Jho Low, who is wanted in connection with alleged 1MDB corruption and money laundering. Low had recently eluded arrest in Hong Kong and Macau, both Chinese territories. Though he is believed to have left the territories, Malaysia will likely continue to press Beijing for help in his capture.
“Malaysia is not in an entirely disadvantageous position” ahead of Mahathir’s visit to Beijing, according to Shahriman Lockman, a senior analyst at the Institute of Strategic & International Studies in Malaysia. “China needs some showcase examples of Belt and Road projects, which seem to have suffered numerous hiccups around the region.”
Shahriman believes China will show a degree of flexibility and a willingness to negotiate in an attempt to keep large projects in Malaysia going, though the extent of that potential flexibility remains to be seen. Despite Mahathir’s tough rhetoric, Shahriman believes the Malaysian leader will refrain from taking a combative stance while in Beijing.
“Mahathir will use this trip to build the relationship rather than being single-minded about the projects. This is about Malaysia fixing the situation back home, not assigning blame on the Chinese,” he opines. “Mahathir knows that he will get nowhere with the Chinese if all that he brings is a list of complaints.”
Beijing has thus far avoided direct criticism of Malaysia’s ruling Pakatan Harapan coalition, though editorials in China’s nationalistic newspaper, the Global Times, have underscored Chinese firms’ right to claim compensation over changes to previously agreed projects. Malaysian officials have otherwise emphasized the durability of Sino-Malaysia ties.
Mahathir is expected to invite Chinese companies to invest in Malaysia when he visits Beijing, provided that those investments enhance Malaysia’s productive capacities, use Malaysian labor and sources, and facilitate skills and technology transfers – a stance in line with his openness toward investments from Chinese e-commerce billionaire Jack Ma.
Liew Chin Tong, a member of the Harapan-component Democratic Action Party (DAP), noted in a recent article that the current government’s “strong legitimacy and domestic credibility” enables it to craft long-term foreign policies that will enjoy longevity and widespread popular support, which will ultimately be to China’s advantage.
“It is to China’s benefit to deal with a Malaysian government that is not perceived to be anyone’s client state,” he wrote. “It is to the advantage of China that Malaysia has a strong voice in the Asean [Association of Southeast Asian Nations] community and in the eyes of the world.”
WoW: Malaysia is needling the dragon. It better not face its fire!
Mahathir is simply addressing the fiscal problems created by Najib. There is no need to be alarmed and believe the spin in this article.
These small countries don’t want to swap white masters with yellow ones.
Can’t do much with those contracts signed and sealed. Money borrowed from the banks. Banks loves delayed payment. Malaysia just has to suck it up.
Yes and no. Strictly speaking, that’s correct contractually. However, there’s still value to be harnest from a political point of view. Horse trading is a time honoured art form
Vikram Reddy, you are inferior, a Whiteman’s best slave, and cannot live without a maste, you are an exception among the SE Asians.
To score political points, it is common in the West for a political party goes extra length to smear the previous opposition party government. In Canada the Liberal government paid hundreds of millions dollars penalty to cancel a helicopter contract signed by its previous PC government in order to bad mouth the PC was incompetent and corrupted. But few years later it signed a similar contract with the same helicopter maker at higher price. The politicians do not have to pay the blunder themselves, as long as something makes them look good, who cares about the money. Malaysian is no exception, only the author is making a mountain off a mole’s mount.
On the other hand Mahathir Mohamad should clean out all corruption in Malaysia, any foreigner, including Chinese, is suspected to be involved in corruption, Mahathir Mohamad should check them out. China should welcome Mahathir Mohamad extending Chinese anti-corruption movement to Malaysia; unlike the American, Japanese and Western nations which use bribery and corruption as a way of doing business to subverting other nation’s sovereignty and destabilizing and corrupting other nation’s society in order to steal their wealth.
I think Mahathir’s demands are reasonable, all countries should be given a chance of development through JV’s, and projects should benefit local labor as well. Economically, I think he’ll find China a much better negotiating partner than the US at present, though Mahathir will definitely try to leverage the Japanese willingness to step in.
The physical demands are another story. The Chinese will likely be flexible negotiators with economic incentives, but unlikely to budge on the South China Sea issue. If Mahathir accepts further BRI projects, he’ll need to accept and sell the status quo to ethnic Malays in a palatable manner. Construction job creation will likely be key here.
Vikram Reddy
Some may want China to lead, but China would not take someone as little brother easily.
Just like the US has proposed China to join G7 or even create G2, but China has rejected. It may be hard for a culture based on Master-Slave, like yours, to understand.
Keep your way, it will be fine for you. But don’t expect China thinks the same way as yours.
Huh? Push what, who? He’s already caved in. Watch the latest CNN interview.
If the government is unable honor high level legal binding bilateral agreements it will be difficult for any country to consider long term investment in Malaysia in future. What Dr M did will set a bad precidence, which will heighten the risk of doing business in Malaysia as its very likely that the next government who win the next election will abolish future PH projects in the same way as what Dr M did. The hasty decision to issue stop work order on the ECRL is going to cost Malayia many millions of dollar since all the cost related to the delays and work suspension (e.g labour, equipment, material supply, engineering consulting etc) will be bill to Malaysia regardless of the outcome of the meeting between Dr M and China. What is even more foolish is Dr M attempt to pull China stateowned company into the domestic political scandal, by accusing them of corruption etc even before conducting a thorought investigation. Dr M have been requesting to meet President Xi for the longest time, its not sure why China is taking so long to firm up a date for his visit?
Najib is a domestic problem and its Dr M who made the decision to scrap the RM44 billion a year GST without first review its impact. So why should China or any foreign countries be paying for his gung-ho attemtp to glorify his political comeback. The way Dr M is criminalising Najib is no diferent to the way he does it to Anwar, and critism of PM Badawi. Dr M is just too full of himself to realise that he has lost huge amont of state funds during his term as PM.
Calling PH as previous opposition party is a weak attempt to shield the Dr M’s government from its responsibility and weak handling of bilateral relationship.
Its Malaysia’s job and responsibility negotiate a good deal for themselves not the responsiblity of China. Whether the JV turn out good or not it really depends how the host country utilise and manage their investment. If they insist that the investment is bad and do nothing, it will be as good as not investing at all. Take Proton for example. Was investing in car industry a good idea? Yes it was, but Proton brand was ruin because of the country dogmatic and stubborn approach to insist on "good deal" which is why Proton struggle to find a technology partner. On the other hand Thailand was smarter to develop their domestic automobile industry by allowing foreign car markets to establish manufacturing facilities, while the Thai companies develop their SME to supply to car manufacturers. So Dr M is now saying HSR is not neccessary, while Thailand and Indonesia are investing heavily on HSR infrastructure. Very soon, Thailand is going to leap frog Dr M again by establishing their local HSR industry while Malaysia is still doing feasibility study on Proton 2.0.
Especially those political animals associate with western world, with western name like Alfonso, Chris, David.
Mahathir can push all he wants. He will get what you get when you push a stone wall.
This is not 1950s when Malays could push the Chinese. The lucky ones went their ways to Singapore. The unfortunate ones were left to be milked.
Ignorant, immoral, xenophobic Malays without skills do what the Kaliphate did for 1,300 years – live of Tariffs on goods made by others. Hardworking Chinese have all the capital and the skills to generate wealth, Malays only sit and tax them to live off.
But now the Malaysian Chinese have a powerful friend. Greedy Mahathir if will lose his shirt if he foolishly tries to "push" China. He should learn from what Mongols did to Baghdad when the Kaliphate pushed Asia then. Arab Islam has not recovered 8 centuries later.